Moving Average Analysis of CAT

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From the Weekend Report 1/8/2010: The MACD Cycle is in phase one here, with CAT 34.00 % above the 200 bar SMA, increasing the distance over the week.

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This page looks at the predictive abilities of different methods of averaging applied to CAT stock prices. Techniques available include moving weighted or exponential averages of various periods and the family of MACD (Moving Average Convergence Divergence) indicators.

Unfortunately, some of the most popular indicators of this type can prove to be the worst forcasting indicators. The next page tests the effectiveness of these methods as predictors of future prices for CAT.

Green is the 20 bar moving average, while the 200 session average is red. Often the simple unweighted moving averages seen in this plot will give a more accurate indicator, with fewer false signals than some of the supposedly more sophisticated techniques that we test below. It is always possible to fine tune an exponential or other weighted average so that it seems to outperform a simple average in a given situation. However, over-tuning can increase false and misleading indicators. A good un-ambiguous signal will be noticable through a variety of averaging methods, including some of the most simple.

Moving Average Convergence of Caterpillar

	Companies In the News
	In the news, Monday, February 08, 2010: A favorable condition has developed with Nicor Inc., ticker symbol GAS. Also, there are breaking events concerning American International Group, Inc. (AIG) and Illinois Tool Works Inc. (ITW)

MACD analysis can use any of an infinite number of averaging methods and coefficients. Also, many analysts add a trigger line which is based on some average of the first two averages. Here we depict the results of 12 and 26 session Exponential Moving Averages. The exponential coefficient used here is .18. There is nothing magic about these parameters, but these are frequently seen.

Float the cursor for a longer term chart.

Moving Average Convergence Divergence, or MACD, produces buy or sell signal that are color tinted here.

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Moving Avg. 20/200 Divergence	Signaled Appreciation minus non-signaled Appreciation	Annualized %
Buy Signals - 37 instances
Future30SesAvgClose	2.40 % minus 0.90 % = 1.51 %	12.75 %
Future5SesAvgClose	1.07 % minus 0.18 % = 0.90 %	45.67 %
Future2SesAvgClose	0.23 % minus 0.09 % = 0.14 %	17.90 %
Sell Signals - 37 instances
Future30SesAvgClose	1.89 % minus 0.90 % = 0.99 %	8.41 %
Future5SesAvgClose	0.68 % minus 0.18 % = 0.50 %	25.62 %
Future2SesAvgClose	0.39 % minus 0.09 % = 0.30 %	38.40 %
	.
Moving Avg. 5/20 Divergence	Signaled Appreciation minus non-signaled Appreciation	Annualized %
Buy Signals - 217 instances
Future30SesAvgClose	1.07 % minus 0.90 % = 0.17 %	1.44 %
Future5SesAvgClose	0.30 % minus 0.18 % = 0.13 %	6.37 %
Future2SesAvgClose	0.14 % minus 0.09 % = 0.06 %	7.32 %
Sell Signals - 217 instances
Future30SesAvgClose	1.15 % minus 0.90 % = 0.25 %	2.13 %
Future5SesAvgClose	0.44 % minus 0.18 % = 0.26 %	13.20 %
Future2SesAvgClose	0.15 % minus 0.09 % = 0.07 %	8.53 %
	.
Moving Avg. 5/200 Divergence	Signaled Appreciation minus non-signaled Appreciation	Annualized %
Buy Signals - 55 instances
Future30SesAvgClose	0.52 % minus 0.90 % = -0.38 %	-3.19 %
Future5SesAvgClose	0.01 % minus 0.18 % = -0.17 %	-8.48 %
Future2SesAvgClose	-0.13 % minus 0.09 % = -0.21 %	-27.21 %
Sell Signals - 55 instances
Future30SesAvgClose	0.59 % minus 0.90 % = -0.31 %	-2.61 %
Future5SesAvgClose	-0.13 % minus 0.18 % = -0.30 %	-15.36 %
Future2SesAvgClose	-0.24 % minus 0.09 % = -0.33 %	-41.32 %
	.
MACD 12/26 Divergence	Signaled Appreciation minus non-signaled Appreciation	Annualized %
Buy Signals - 642 instances
Future30SesAvgClose	0.45 % minus 0.90 % = -0.45 %	-3.82 %
Future5SesAvgClose	-0.01 % minus 0.18 % = -0.18 %	-9.20 %
Future2SesAvgClose	-0.01 % minus 0.09 % = -0.10 %	-12.38 %
Sell Signals - 642 instances
Future30SesAvgClose	0.58 % minus 0.90 % = -0.32 %	-2.73 %
Future5SesAvgClose	0.14 % minus 0.18 % = -0.03 %	-1.62 %
Future2SesAvgClose	0.10 % minus 0.09 % = 0.01 %	1.67 %
	.
MACD 12/26 Signal	Signaled Appreciation minus non-signaled Appreciation	Annualized %
Buy Signals - 865 instances
Future30SesAvgClose	1.16 % minus 0.90 % = 0.26 %	2.23 %
Future5SesAvgClose	0.28 % minus 0.18 % = 0.11 %	5.51 %
Future2SesAvgClose	0.16 % minus 0.09 % = 0.07 %	9.16 %
Sell Signals - 864 instances
Future30SesAvgClose	1.03 % minus 0.90 % = 0.13 %	1.14 %
Future5SesAvgClose	0.25 % minus 0.18 % = 0.07 %	3.60 %
Future2SesAvgClose	0.06 % minus 0.09 % = -0.03 %	-3.52 %
	.
Calibrated M by Q Half Cycle Moving Avg.	Signaled Appreciation minus non-signaled Appreciation	Annualized %
Buy Signals - 353 instances
Future30SesAvgClose	1.41 % minus 0.90 % = 0.52 %	4.36 %
Future5SesAvgClose	0.38 % minus 0.18 % = 0.21 %	10.50 %
Future2SesAvgClose	0.40 % minus 0.09 % = 0.31 %	39.53 %
Sell Signals - 353 instances
Future30SesAvgClose	0.94 % minus 0.90 % = 0.04 %	0.35 %
Future5SesAvgClose	-0.14 % minus 0.18 % = -0.32 %	-16.28 %
Future2SesAvgClose	-0.18 % minus 0.09 % = -0.27 %	-33.77 %
	.
Calibrated M by Q Full Cycle Moving Avg.	Signaled Appreciation minus non-signaled Appreciation	Annualized %
Buy Signals - 235 instances
Future30SesAvgClose	0.96 % minus 0.90 % = 0.07 %	0.55 %
Future5SesAvgClose	0.36 % minus 0.18 % = 0.19 %	9.59 %
Future2SesAvgClose	0.32 % minus 0.09 % = 0.23 %	29.36 %
Sell Signals - 235 instances
Future30SesAvgClose	0.97 % minus 0.90 % = 0.07 %	0.62 %
Future5SesAvgClose	-0.02 % minus 0.18 % = -0.20 %	-9.96 %
Future2SesAvgClose	-0.12 % minus 0.09 % = -0.21 %	-26.22 %
	.
Projected Crossing of SMA 20/200.	Signaled Appreciation minus non-signaled Appreciation	Annualized %
Buy Signals - 39 instances
Future30SesAvgClose	2.07 % minus 0.90 % = 1.17 %	9.92 %
Future5SesAvgClose	0.31 % minus 0.18 % = 0.14 %	7.04 %
Future2SesAvgClose	0.37 % minus 0.09 % = 0.28 %	35.41 %
Sell Signals - 46 instances
Future30SesAvgClose	2.63 % minus 0.90 % = 1.73 %	14.65 %
Future5SesAvgClose	0.35 % minus 0.18 % = 0.18 %	8.91 %
Future2SesAvgClose	0.11 % minus 0.09 % = 0.02 %	2.72 %
	.
Projected Crossing of SMA 5/20.	Signaled Appreciation minus non-signaled Appreciation	Annualized %
Buy Signals - 265 instances
Future30SesAvgClose	0.59 % minus 0.90 % = -0.31 %	-2.64 %
Future5SesAvgClose	0.12 % minus 0.18 % = -0.06 %	-2.85 %
Future2SesAvgClose	-0.02 % minus 0.09 % = -0.11 %	-13.46 %
Sell Signals - 216 instances
Future30SesAvgClose	0.68 % minus 0.90 % = -0.21 %	-1.80 %
Future5SesAvgClose	-0.02 % minus 0.18 % = -0.20 %	-9.95 %
Future2SesAvgClose	0.18 % minus 0.09 % = 0.09 %	11.53 %
	.

The best buy signal for 30 future sessions was 1.51 % from the Moving Avg. 20/200 Divergence,and the best sell signal for was -0.32 % from the MACD 12/26 Divergence.

For 5 future sessions the best buy signal was 0.90 % from the Moving Avg. 20/200 Divergence,and the best sell signal was -0.32 % from the Calibrated M by Q Half Cycle Moving Avg..

The best buy signal for 2 future sessions was 0.31 % from the Calibrated M by Q Half Cycle Moving Avg.,and the best sell signal was -0.33 % from the Moving Avg. 5/200 Divergence.

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